311_session_8_simulation

311_session_8_simulation - Simulation BUAD311 Session 8 1...

Info iconThis preview shows pages 1–7. Sign up to view the full content.

View Full Document Right Arrow Icon
1 Simulation BUAD311 Session 8
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
2 Objectives Generate random numbers. Simple Examples Portfolio Optimization Project Management New Product Development
Background image of page 2
Session 14 3 Why simulation? Methods to deal with randomness Build up models to have analytical solution Mimic the randomness, observe and analyze the outcome Simulation
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Session 14 4 Portfolio Example What is the expected value, standard deviation and coefficient of variation of the portfolio? Budget: $1000 Stock t A B Current stock price 100 50 Portfolio composition 90% 10% # of share 9 2 Estimate a month later Distribution ~U[50,150] ~N(45, 3) Simulate the stock price a month later to observe the portfolio value. next
Background image of page 4
Session 14 5 Random Number Generator = RAND() generates a random variables between 0 and 1 ~ Uniform Distribution between [0,1] = 2*RAND() generates a random variable between 0 and 2 = 3 + RAND() generates a random variable between 3 an 4 = a + (b-a)*RAND() generates a random variable between a and b ~ Uniform
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Session 14 6 Generating Normal Distribution = NORMINV(probability, mean, standard deviation) If we assign probability = RAND() then NORMINV function generates a random variable that follows a normal distribution with specified mean and standard deviation =NORMINV(RAND(), mean, standard deviation)
Background image of page 6
Image of page 7
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 02/15/2011 for the course BUAD 311 at USC.

Page1 / 17

311_session_8_simulation - Simulation BUAD311 Session 8 1...

This preview shows document pages 1 - 7. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online